8 Accounting Technology Innovations for Building Your Accounting Firm

Few business practices have as rich a history as accounting. It’s one element of modern business that can be clearly traced back to historical businesses of early centuries. Accounting is integral to the systematic organization and success of companies of all sizes and new innovations promise to help today’s accounting firms grow into the future.

What is Accounting Technology?

Accounting technology is best described as any system, process, or advanced tool that allows a business to improve the efficiency or accuracy of accounting, while simultaneously adding value to the bottom line.

In the past, accounting technology was as simple as something like a paper ledger. In today’s world, it’s as advanced as cloud-based platforms that use predictive analytics to proactively suggest changes businesses can make to save money or reallocate funds.

For accounting firms, having access to the latest accounting technology can be catalytic in the pursuit of sustainable growth. But with so many different innovations on the market, it can be tough to know which technologies are worth pursuing. A quick dive into the history of accounting innovation will provide the perspective you need to determine when a piece of technology is worth pursuing and when it’s nothing more than a fad.

The History of Accounting Technology

Accounting is unique in that it can be traced back to the origins of mankind. Unlike other business practices that have emerged over the years, accounting is closely tied to ancient civilizations and business developments. Here’s a truncated look at the progression of accounting over the years:

10,000 B.C. – 2000 B.C. Historians and archeologists have discovered markings on cave walls that indicate people were tracking things like livestock and food. As Hindu-Arabic numerals and arithmetic evolved, it became easier to monitor and track transactions over time. As with many other modern systems, Egyptian civilizations were among the first to develop early accounting technologies. They used a barter system that consisted of tokens and clay balls to create inventory and transactional records. The Sumerians were responsible for developing the abacus – the precursor to the calculator. Finally, papyrus was used to create the first sheets of paper (which is where accounting transactions were recorded).

2000 B.C. – 1500 A.D. During this period, global trade and shipping increased. First came single-entry bookkeeping, in which each financial transaction was recorded in a single entry in a transaction log. In 1458, Benedetto Contrugli invented the double-entry accounting system, which revolutionized the accounting world and introduced the debt/credit system that’s still used by most firms today. A few decades later, Italian mathematician Luca Bartolomes Paciolo introduced a system of record keeping that used a ledger, journal, and memorandum. He also wrote the first books on accounting, which landed him the title of “the father of accounting and bookkeeping.”

500 A.D. – 1960 A.D. As currencies evolved and bank notes were introduced into modern economies around the world, new accounting technologies emerged and iterated with blazing speed. From adding machines in the 1880s to punch card machines in the early 1900s, the progression of accounting technology is a direct reflection of the progression of larger technological trends. In 1955, a company bought a computer for the first time purely for accounting. In the wake of World War II, GE purchased UNIVAC to run payroll in all of its factories. It took UNIVAC a whopping 40 hours to complete basic payroll processes.

1960 A.D. – 2000 A.D. The 1960s were an important decade for modern accounting. Transactions between vendors and customers were largely standardized. By 1978, VisiCalc – the first spreadsheet software that enabled financial modeling on the computer – was introduced. By the 1990s, the first enterprise resource planning (ERPP) solutions were developed. In 1998, QuickBooks was launched.

2000 A.D. – Present. The dawn of the 21st century introduced the age of intelligent accounting. Over the last two decades, we’ve seen things like business intelligence, artificial intelligence (AI), predictive analytics, big data, the cloud, and the internet of things completely transform they ways in which accounting is approached – both in small businesses and large enterprises. In 2016, Taxfyle was launched. It has since become the leading on-demand tax filing solution for individuals and businesses.

In the coming decade, cryptocurrencies, blockchain, and robotic process automation (through AI and machine learning) are expected to revolutionize the ways in which accounting is approached.

How Do Accountants Use Technology Today

The need for accounting has held steady over the centuries and decades. The only thing that has changed is the type of technology that’s used to facilitate accounting processes. Whereas it was a papyrus ledger and abacus in ancient Egyptian civilization, it’s now a computer and cloud software in modern society. But at the end of the day, accountants continue to use technology for the following purposes:

Accuracy.

There are plenty of areas of business (and life) where there’s room for a healthy margin of error. Accounting isn’t one of them. In accounting, the numbers either reconcile or they don’t. First and foremost, today’s accounting technology is used to reduce the risk of error and enhance the integrity of the numbers.

Efficiency.

Second only to accuracy is efficiency. Modern accounting technology reduces the time it takes to record transactions, balance budgets, reconcile accounts, and develop forward-thinking strategies. Accountants understand that time is money, so they continue to utilize the solutions that are most efficient for their processes.

Profitability.

When processes are accurate and efficient, so much of the guesswork that’s typically involved in accounting is removed. This directly results in increased profitability – both for accounting firms and for their clients.

Growth.

When it’s all said and done, the latest in innovation allows accounting firms to enjoy sustainable growth. And as they grow, they’re able to serve more clients, add more value to their clients, and create positive change.Ultimately, accountants, accounting firms, and small businesses use the latest technology and innovations to improve in these four areas. As technology continues to evolve, it becomes easier to meet goals and support other business practices.

8 Accounting Technology Innovations

According to a survey conducted by Robert Half, 41 percent of CFOs cite technology as one of the major sources of stress in their jobs. In particular, they find that accounting innovations are progressing so rapidly that it’s challenging to find stability and/or keep up.

Despite the stress technology brings, CFOs understand just how important it is. In fact, they find staying up to date with technology to be more important than “regulatory compliance, “harnessing/managing big data,” and “finding and keeping skilled staff.”

Technology continues to iterate at a faster and faster pace. If you noticed, it once took decades or even centuries for accounting innovation to make significant strides. It now takes weeks or months for new accounting technology to emerge and replace older solutions. So while things can quickly evolve and change, here are a few of the top accounting technology innovations firms are currently using to grow:

1. Cloud-Based Accounting

No other advance in technology has had as big of an impact on accounting in the 21st century as the cloud. Today, almost 100 percent of accounting firms and major businesses are utilizing cloud-based accounting – and for good reason! Cloud applications are able to handle everything from invoicing and payroll to benefits and taxes. And as robust as these systems are, they also offer user-friendly dashboards and intuitive interfaces that make it easy for businesses to see what’s happening at any given point in time.Automation is the biggest benefit of cloud-based accounting. Sophisticated algorithms and machine learning easily handle tasks that previously required hours of manpower to complete. This frees up staff to focus on tasks that require personal touch.

2. Artificial Intelligence

Speaking of automation, AI is changing the game. By as early as next year, many of the labor-intensive tasks that accounting firms have previously relied upon – such as payroll, audits, and tax preparation – will be fully streamlined.AI won’t fully replace humans now or ever. Human intelligence will always be a valuable asset, regardless of how smart computers become. Rather than make accountants obsolete, AI solutions will give accountants access to better information.

“While algorithms will continue to get more powerful and efficient at compiling big data, computers are only great transactional machines. They can’t replace the interpretive capacity of the human mind. It’s also pretty hard to teach a machine common sense,” accounting expert Nick Chandi writes for Forbes. “Technology will give us access to better data, but accountants are the ones who’ll have to apply this information to the real world to provide crucial business insights and intelligence.”

3. Real Time Reporting

As AI has continued to improve, the accounting world has gotten a taste of the value of real time reporting and how it changes the ways in which accounting firms manage and interact with their clients.

Over the past few decades, the delay between when an accounting event occurs and when it’s recorded has significantly diminished. It used to be that businesses were days behind – meaning the reports they had in their hands were only accurate as of a few days ago. Then it become hours. And then it became minutes. However, today’s most robust accounting technologies actually offer real time reporting. That means every accounting transaction is inputted, recorded, and reported at the same time.

In terms of the relationship between accounting firms and their clients, real time reporting helps establish trust and reduce confusion. It enables both parties to see the same information at the same time.

4. Optical Character Recognition

One of the primary focal points of accounting innovation over the last decade and a half has been the integration of various tools and systems so that they’re able to seamlessly and effortlessly communicate with one another. Further enhancing these integrative capabilities is a technology known as optical character recognition (OCR).

“Advances in this technology allow companies to use scanners or even the cameras on mobile devices to capture printed financial information such as receipts and invoices and translate the text into digital files,” accountant Bill Gerber explains. “Improved accuracy has cut down on the rate of error during this translation, and future updates promise to further improve the procedure’s efficiency.”

While OCR has become a staple in the industry, there’s still a need to proofread and double-check scanned copies for errors. As these systems become more accurate and proven, OCR will only continue to add value to accounting firms and their clients.

5. Mobile Accounting

It used to be that accountants were metaphorically chained to their desks – unable to leave their computers during normal work hours. And if they did leave their desks, they were unable to record information or provide clients with the access they needed. Thanks to mobile accounting, this is no longer the case.

Mobile accounting solutions gives accounting firms the type of ubiquitous connectivity that people could only have dreamt of in decades past. Firms can reconcile accounts, add receipts, send invoices, or create expensive claims all from a smartphone, tablet, or laptop. As an added benefit, this allows accounting firms to hire employees in different areas of the country/world and manage remote teams with greater efficiency than ever before.

6. Blockchain

If the cloud has been the most transformational accounting technology of the 21st century thus far, blockchain will be the most important over the next 20 years.

Blockchain is a single-ledger technology that lets users from a variety of sources access the same information in real time. This enables business leaders, investors, and clients to all see the same information simultaneously and without delay.

“If a change is made by one party, everyone with access can see this change as soon as it’s validated. Transactions that used to take hours or days will now take minutes or seconds. This speed also comes with greater security and transparency,” Chandi explains. “Instead of worrying if a transaction has been reported, you can be assured that it was recorded. Auditing, compliance and reconciliation will all be faster and more accurate – all without time-consuming or error-prone manual data entry.”

7. Customer Relationship Management Software

Customer relationship management (CRM) systems are absolutely integral to accounting firms that want to grow the right way. When combined with automated solutions and AI, CRM helps firms engage clients in the right ways. It removes the guesswork, streamlines the mundane, and ensures there are always adequate resources to engage customers in a timely and proactive manner.

8. Social Media

While it’s not considered an accounting-specific technology, social media – as a suite of tools – yields tangible value for accounting firms that are looking to grow.

Social media platforms – like Facebook, Twitter, and LinkedIn – have given firms the ability to build online brands and reach prospective clients with greater ease than ever before. It also provides additional access points for firms to engage their current clients and continually add value.

Social media should be viewed as part of a firm’s larger business development strategy. It’s not the only option for growth, but it plays a significant role in reaching the right people at the right time.

Vetting and Choosing the Right Accounting Technology for Your Firm

There is no one-size-fits-all solution or technology stack. It’s all about compiling the right innovations that will allow your firm to enjoy efficient growth and sustainable results. As you vet different accounting solutions, consider:

Function.

The first thing to think about is how the technology specifically enhances your accounting efforts. In other words, what purpose does it practically serve? By asking yourself this question ahead of time, you’re less likely to waste your time on solutions that already perform the same tasks that your existing technology stack already handle.

Compatibility.

You always have to think in terms of cohesiveness and cooperation. You want your entire technology stack to work together. If there’s any incompatibility, it’ll show. Take the time to consider which tools are able to communicate with one another; whether or not there’s an API; etc.

Cost.

Practically speaking, you always have to think about the bottom line cost of a solution. (Note: This doesn’t necessarily mean the price you pay for the tool. You also have to consider the value it provides in return.) For example, consider two similar tools that cost $1,000 and $200 per month, respectively. If the more expensive tool creates $5,000 in value per month, while the cheaper tool only produces $800 in value, the pricier one is ultimately the better choice.

Security.

You can’t introduce any tool into your business – accounting or otherwise – without first thinking about security. Any weaknesses or vulnerabilities found in an accounting tool could permeate your larger business and create financial and legal issues down the road. If you’re unsure of what sorts of security layers are built in to a specific platform, it’s worth asking for more information.

When you look at modern accounting technology through these filters, you have a much better chance of building your accounting firm on a solid foundation that’s conducive to healthy growth.

Try Taxfyle Today

At Taxfyle, we’re proud to support some of the world’s best companies as they pursue their business goals and accounting objectives. When you partner with us, you gain access to a robust tax preparation outsourcing solution that enables you to scale your firm without neglecting the details.

For more information on how you can try Taxfyle risk-free, please contact us today!